Buying a flipped house vs. renovating
Should you shop flipped homes, or is a Renovation Loan the path to your dream home?
Written by Subject Matter Expert Brian Nowakowski, Academy Mortgage Renovation Lending Manager
If you’re in the market for a new home, you might have encountered this problem. Many buyers are finding existing inventory to be outdated. At first glance, it may seem like it would take a significant amount of work to modernize a house to your liking. Thankfully, even in a housing inventory crisis, you have options.
Sick of seeing outdated listings? Here’s a solution.
To find an updated house in today’s market, there are typically two routes you can take: buy a house that’s been flipped by an investor or purchase a house with potential and renovate.
Here are several reasons you might be attracted to a freshly flipped house:
- It’s new. The benefits of buying a flipped home are obvious the minute you walk in the door—gleaming hardwood floors, modern Shaker style kitchen cabinets, quartz granite countertops, brushed nickel finishes, and subway tile backsplash all make a strong first impression.
- It’s exciting. A flipped house is completely up to date and outfitted with the latest trends and features; no wonder these homes sell exceptionally well, especially when they're staged.
- It’s convenient. A home that’s been flipped is ready to go. You won’t have to worry about hiring contractors, planning renovation projects, meeting deadlines, or making payments.
But is it really your smartest option? The immediate reaction to a flipped house is overwhelming as it normally shows very well. Yet oftentimes, the final product may not reflect the quality that went into the workmanship of the house. Flippers are concerned with maximizing profit. This can come at the expense of a job well done.
So many times, a flipper will try to get the most bang for their buck out of their renovations—seeking that “wow factor” above all else. But if a flipper is unlicensed, or hires unlicensed workers, the work will be less skilled.
What influences a flipped home’s sales price? From an investor’s perspective, it’s the cost of acquisition (price of the house) plus the price of renovation plus profit. Ultimately, the market determines what a house will be valued at and sold for. Take out an investor’s cost of renovation as a variable, and this puts you in the equity position. If you purchase a home and renovate, you’ll reap the benefits of any profits that are made.
Here are several other reasons you might appreciate buying and renovating your own house:
- You can ensure quality. Avoid the “flipping mentality” and instead focus on renovation quality as opposed to turning a profit. Since this is the house you're going to be living in, you should be able to manage the workmanship that goes into it.
- You’ll have more say-so over your location. Using an all-in-one Renovation Loan from Academy Mortgage allows you to acquire a property in the area that you wish and fund the money for the home improvements, all with one loan at the time of purchase.
- You’ll have freedom and flexibility. Not only will you have more opportunity to live in your desired neighborhood without having to compromise, you’ll also gain the flexibility and freedom to own your renovation process from start to finish. You can customize your home any way you’d like.
- You can choose to spend more to get what you want. Speaking of customization: The world really is your oyster when it comes to how you renovate. Since you’re not designing your home for profit, you can plan more complex projects to create the dream home you have in mind.
Talk to a mortgage expert to find out your best option.
Remember, quality is oftentimes in the things you don't see—the things that a home inspection doesn’t pick up. These potential issues may be behind the walls or in other areas out of sight. But they matter: The difference in quality can be the difference between the craftsmanship of a home lasting five years versus 50.
A perfect example of this is tile. There’s a systematic approach when installing tile that will ensure it won’t crack and that it will stay adhered for as long as you own the house. This typically starts with installing and securing the underlayment. Whether it’s a Schluter system or fiber cement board, the installation technique and the materials used will ensure the quality.
However, if tile is installed directly to the subfloor, it may feel sound and secure now, but it most likely won’t last for more than a couple of years before you start seeing problems. How would you know if tile was installed properly?
As mentioned above, this is a major benefit of overseeing your home’s renovation yourself. More than half of homeowners agree: Recently, home remodeling activity hit a four-year high.
When it comes to your renovation: You’re in the driver’s seat.
You get to choose the contractor you like and trust. You get to choose the countertops that you’ve always wanted. You get to choose the tile on your backsplash, the material for your flooring, the design of your light fixtures, and the colors of your walls. It's your house without compromise, and best of all, you get to supervise the entire renovation process. Contact a local Loan Officer to get started.
This is for informational and educational purposes only and not intended as an advertisement as defined by Regulation Z. Please consult a trusted professional as personal circumstances may vary. No specific results are guaranteed. MAC623-1481921.